Case BriefsHigh Courts

Bombay High Court: The Division Bench of V.K. Jadhav and Shrikant D. Kulkarni, JJ., observed that,

“…in the case of cheating, the intention of cheating right from the inception is important.”

Instant matter was directed towards quashing the FIR registered for the offence punishable under Sections 420, 323, 504, 506 of Penal Code, 1860.

Respondent 2 dealt used to sell onion collected from small farmers in the wholesale market on commission. Allegedly the applicants had purchased a huge quantity of onion. Respondent 2 submitted that the amount to the tune of Rs. 30,77,431/- towards the price of purchased onion remained unpaid.

Even after repeated demands for the said amount, applicant did not pay the said amount.

Analysis, Law and Decision

High Court expressed that the power of quashing the criminal proceeding should be exercised very sparingly and with circumspection and that too in a rarest of rare cases.

Court is not justified in embarking upon the inquiry as to the reliability or genuineness or otherwise of the allegations made in the F.I.R. or the complaint and that extraordinary or inherent powers do not confer an arbitrary jurisdiction on the Court to act according to its whim and caprice. 

Court noted that respondent 2 did not dispute about the filing of the complaints against the deceased for having committed the offence punishable under Section 138 NI Act.

Bench was surprised to note that the allegations were made against the deceased alone with the specific contention that he was the proprietor and in that capacity, he had issued the cheques for the balance amount.

Adding to the above, Court observed that it was not stated in those complaints that deceased Selvakumar, being a power of attorney, had issued the cheques in favour of respondent 2 for the balance amount on behalf of the firm and therefore, since he being the signatory of the cheques, the complaints under Section 138 of the Negotiable Instruments Act, 1881 came to be filed against him.

After the death of the deceased, respondent 2 changed his stand and instituted the suit wherein the applicants have been implicated as defendants.

In Court’s opinion, respondent 2 had filed the complaint with some ulterior motive and mala fide intention.

“…lodging of the complaint in the police station with some mala fide intention is nothing but an attempt to convert a civil dispute into a criminal dispute.” 

In Supreme Court’s decision of Anand Kumar Mohatta v. State (NCT of Delhi), (2019) 11 SCC 706, it was ruled that where a civil dispute is converted into a criminal case to harass the accused, the exercise of power to quash criminal proceedings warranted.

Dispute in the present matter was purely of civil nature and it did not constitute a criminal offence.

Hence, Court opined that the F.I.R. lodged by respondent 2 is nothing but an abuse of the process of the court and the same is necessary to be quashed and set aside in the interest of justice.

In view of the above discussion, criminal application was disposed off. [Thirumalai Prabhu R v. State of Maharashtra, 2021 SCC OnLine Bom 874, decided on 18-06-2021]


Advocates who appeared in this case:

Advocate for Applicants: Mrs. Sonawane Sunita G.

APP for Respondent No. 1-State: Mr. G.O. Wattamwar

Advocate for Respondent No. 2: Mr. Rahul R. Karpe

Hot Off The PressNews

Extension of Cheque Truncation System (CTS) across all bank branches in the country.

What is Cheque Truncation System (CTS)?

Cheque Truncation System of Image-based Clearing System is for faster clearing of cheques.

Cheque Truncation speeds up the process of collection of cheques resulting in better service to customers, reduces the scope of loss of instruments in transit, lowers the cost of collection of cheques, and removes reconciliation-related and logistics-related problems, thus benefitting the system as a whole.

When was CTS implemented?

The CTS is in use since 2010 and presently covers around 1,50,000 branches. All the erstwhile 1219 non-CTS clearing houses (ECCS centres) have been migrated to CTS effective September 2020. It is, however, seen that there are branches of banks that are outside any formal clearing arrangement and their customers face hardships due to longer time taken and cost involved in collection of cheques presented by them.

CTS to extend across all bank branches

To leverage the availability of CTS and provide uniform customer experience irrespective of location of her/his bank branch, it has been decided to extend CTS across all bank branches in the country. To facilitate this, banks shall have to ensure that all their branches participate in image-based CTS under respective grids by September 30, 2021. They are free to adopt a model of their choice, like deploying suitable infrastructure in every branch or following a hub & spoke model, etc. and concerned banks shall coordinate with the respective Regional Offices of RBI to operationalise this.


Reserve Bank of India

Case BriefsHigh Courts

Delhi High Court: Subramonium Prasad, J., addressed a matter wherein it was reiterated that the initial burden of proving the burden of the non-existence of debt is on the accused under Section 118 of Negotiable Instruments Act, 1881.

The instant revision petition was filed against the order passed dismissing the appeal and affirming the Metropolitan Magistrate’s order convicting the petitioner for offences punishable under Section 138 of Negotiable Instruments Act, 1881.

Petitioner has also challenged the order wherein the petitioner has been sentenced to undergo imprisonment for a period of two months and also directed the petitioner to pay an amount of Rs 13 lakhs as fine payable as compensation to the respondent as per the provision of Section 143 (1) of NI Act read with Section 357 (1)(3) of CrPC.

Facts that lead to the case

Respondent financed a bus for the petitioner by giving a loan and in discharge of the liability, petitioner handed over the cheques in favour of the respondent. When the said cheques were deposited they were returned as unpaid/dishonored for the reason ‘Funds Insufficient’.

Petitioner submitted that the vehicle was handed over to the respondent company for getting the vehicle converted to CNG but the said vehicle was never returned to the petitioner nor the accounts related to the hire purchase were settled. In fact, the blank cheques given to the respondent earlier were misused.

Though Metropolitan magistrate found the petitioner’s deposition to be inconsistent and found that the bus was already sold by the petitioner.

Metropolitan Magistrate, therefore, held that the accused/petitioner was not been able to rebut the presumption that the cheques had been paid for the discharge of any liability and hence convicted under Section 138 NI Act.

Analysis, Law and Decision

Section 118 of the NI Act raises a presumption that a cheque is issued for consideration until the contrary is proved. It is well settled that the initial burden in this regard lies on the accused to prove the non-existence of debt by bringing on record such facts and circumstances which would lead the Court to believe the non-existence of debt either by direct evidence or by preponderance of probabilities.

In the instant matter, other than mere ipsi dixit of the petitioner there was no debt due and payable nothing was on record to show that the cheques were not issued for discharge of liability for the bus.

Bench stated that the purpose of introducing Section 138 of the NI Act was to bring sanctity in commercial transactions.

Further, the Court noted that the lower courts on perusal of records came to the conclusion that the cheques were given in discharge of the debt.

While expressing that the scope of revision petition under Sections 397/401 CrPC read with Section 482 CrPC is extremely narrow Court referred the following Supreme Court decisions:

State v. Manimaran, (2019) 13 670

State of Haryana v. Rajmal, (2011) 14 SCC 326

In view of the above discussion, Bench did not find any that required the interference in the lower court’s judgment.

Further, the Court added that the respondent did not file the books of accounts was not fatal to the case of the respondent. It was open to the petitioner to produce his books of accounts to rebut the presumption and bring out a prima facie case that there was no debt due and payable on the date the cheques were dishonoured.

Petitioner failed to show as to how there was no subsisting debt on the date when the cheques were dishonoured due to insufficiency of funds.

In view of the above discussion, the revision petition was dismissed. [G.D. Kataria v. AVL Leasing & Financing Ltd., 2020 SCC OnLine Del 1056, decided on 03-02-2021]


Advocates for the parties:

Petitioner: Medhanshu Tripathi, Advocate

Respondent: Anuj Soni, Advocate

Hot Off The PressNews

Positive Pay System for Cheque Truncation System (CTS)

The concept of Positive Pay involves a process of reconfirming key details of large value cheques. Under this process, the issuer of the cheque submits electronically, through channels like SMS, mobile app, internet banking, ATM, etc., certain minimum details of that cheque (like date, name of the beneficiary/payee, amount, etc.) to the drawee bank, details of which are cross-checked with the presented cheque by CTS. Any discrepancy is flagged by CTS to the drawee bank and presenting bank, who would take redressal measures.

National Payments Corporation of India (NPCI) shall develop the facility of Positive Pay in CTS and make it available to participant banks. Banks, in turn, shall enable it for all account holders issuing cheques for amounts of ₹50,000 and above. While availing of this facility is at the discretion of the account holder, banks may consider making it mandatory in case of cheques for amounts of ₹5,00,000 and above.

Only those cheques which are compliant with the above instructions will be accepted under dispute resolution mechanism at the CTS grids. Member banks may implement similar arrangements for cheques cleared/collected outside CTS as well.

Banks are advised to create adequate awareness among their customers on features of Positive Pay System through SMS alerts, display in branches, ATMs as well as through their website and internet banking.

Positive Pay System shall be implemented from January 01, 2021.


Reserve Bank of India

[Press Release dt. 25-09-2020]

Case BriefsHigh Courts

Allahabad High Court: While deciding a petition filed under Article 227 of the Constitution of India, Suresh Kumar Gupta, J., dismissed the same and declined to interfere in the judgment delivered by Sessions Court.

The present petition has been filed by the petitioner to set aside the impugned orders dated 31-10-2018 passed by Additional Court No. 3, Agra in Complaint No. 1500 of 2011 (Nepal Singh v. Dhirendra Singh) under Section 138 of Negotiable Instruments Act, 1881(Hereinafter referred as N.I. Act) and the order dated 6-02-2020 passed by Additional Sessions Judge, Agra in Criminal Revision No. 552 of 2018 (Dhirendra v. State of U.P. ) and to quash the summoning order dated 28-3-2012 as well as an entire proceeding of Complaint Case No. 1500 of 2011 pending in the Additional Court No. 3, Agra.

The factual matrix in the instant case is such that the present petitioner borrowed Rs 1,00,000 from respondent 2 and handed over cheques bearing Nos. 850213 & 850214 for repayment of the borrowed amount. However, the cheques were dishonoured by the bank due to insufficient amount in the account subsequent to which respondent 2 served a notice to the petitioner on 18-10-2011. Later, on 08-11-2011, respondent 2 filed a complaint case no. 1500 of 2011 (Nepal Singh v. Dhirendra Singh) under Section 138 of N.I. Act against the petitioner in the trial court. The trial court vide its order dated 28-3-2012 has taken cognizance and summoned the petitioner.

Counsel for the petitioner, Deepak Kumar Kulshrestha has relied on Section 138 of the N.I. Act, submitting that the complainant/respondent is incompetent to lodge the prosecution as the cheques were issued by the firm Rashmi Arosole & Chemicals and the petitioner is the proprietor of this firm but the firm is not arraigned as an accused. He relied on the judgments delivered in the cases of Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 and Devendra Kumar Garg v. State of U.P., 1990 SCC OnLine All 806 and added that until and unless company or firm is arraigned as an accused director or the other officer of the company/firm cannot be prosecuted/punished in the complaint.

Counsel for the respondent, S.B. Maurya attempted to refute these contentions by submitting that the cheques were drawn by the petitioner in his personal capacity and were given by way of security for payment of money. The circumstances do not warrant the arraignment of the aforementioned firm as a party.

The Court perused the cheques closely and concluded that the cheques bear the petitioner’s signature and that there is no dispute with regard to the fact that the petitioner is the sole proprietor of Rashmi Arosole & Chemicals. Also, on perusal of the registration certificate of the firm, it can be established that the petitioner is the sole proprietor of the firm namely Rashmi Arosole & Chemicals.

Upon careful consideration of the facts, circumstances and arguments advances, the Court observed that-

“While a partnership results in the collective identity of a firm coming into existence, a proprietorship is nothing more than a cloak or a trade name acquired by an individual or a person for the purpose of conducting a particular activity. With or without such trade name, it (sole proprietary concern) remains identified to the individual who owns it. It does not bring to life any new or other legal identity or entity. No rights or liabilities arise or are incurred, by any person (whether natural or artificial), except that otherwise attach to the natural person who owns it. Thus it is only a ‘concern’ of the individual who owns it. The trade name remains the shadow of the natural person or a mere projection or an identity that springs from and vanishes with the individual. It has no independent existence or continuity.”

The Court was able to conclude that in a sole proprietary concern, vicarious liability cannot arise because there’s only one person involved. The identity of the sole proprietor and his concern remain one, even if the sole proprietor may adopt a different name for his concern. Hence, there is no defect in the complaint lodged by the respondent. The sole proprietorship firm need not be impleaded for the respondent to realise his claim against the petitioner.

In view of the above, the petition has been dismissed for lack of merit. The Court found no reason to interfere in the orders dated 31-10-2018 passed by Additional Court No. 3, Agra and the order dated 6-2-2020 passed by Additional Sessions Judge against the petitioner. [Dhirendra Singh v. State of U.P., 2020 SCC OnLine All 1130, decided on 13-10-2020]


Yashvardhan Shrivastav, Editorial Assistant has put this story together

Case BriefsHigh Courts

Punjab and Haryana High Court: A Single Judge Bench of Rajbir Sehrawat, J., dismissed the three petitions which were addressed together involving similar facts but involvement of different cheques and different complaints/proceedings thereunder.

Facts of the case were that petitioner was required to pay certain amount as a result of a settlement between the parties. For the same, petitioner had issued cheque which was dishonoured by the bank and further proceedings under Section 138 of Negotiable Instrument Act, 1881 was carried out resulting into the filing of complaint by respondent. During the pendency of the complaint, the petitioner filed applications for compounding of offences. On refusal to compound the offence by the complainant, the trial court had dismissed the applications. This petition challenged the trial court’s order and prayed for quashing of complaint and summoning order.

The issue before the High Court was to see if the application filed by the petitioner for compounding of the offence under Section 138 could be allowed without complainant’s consent.

The High Court was of the view that the requirement of consent of complainant as a basic ingredient for compounding of offences cannot be dispensed with. Thus, the trial court was right in rejecting the application for compounding of offences on the ground that complainant had not consented for the same. In respect to the prayer of quashing of complaint and summoning order, Court found no factual or legal basis to grant the same. [Anant Tools (Unit No.II) (P) Ltd v. Anant Tools (P) Ltd., 2018 SCC OnLine P&H 1723, decided on 20-09-2018]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of R.K. Gauba, J. dismissed a petition filed under Section 482 CrPC invoking the inherent powers of the Court, seeking the quashing of FIR filed against the petitioner, on the ground of compromise entered into between the parties.

The petitioner was facing prosecution for offences punishable under Section 420 read with Section 511, and Sections 471, 474, 419 and 381 IPC. The allegation against the petitioner was that he was an employee of Kundan Edible Oil Mills. It was stated that the petitioner, in his capacity as the said employee, dishonestly removed a cheque leaf of the said entity against its bank account with HDFC bank. The said cheque was forged and fabricated purporting it to be a cheque issued for the sum of Rs 6 lakhs and was presented to the bank for obtaining payment thereagainst. The cheque, on scrutiny by the Bank, was found to be forged and fabricated. Consequently, an FIR was registered. The petitioner prayed for quashing of FIR and consequent proceedings on the basis of compromise entered into between the petitioner and the respondents.

The High Court noted that during the investigation, the petitioner was unable to account for possession of the cheque which was forged, grave suspicion arising that he knew fully well that it was a forged instrument. Even then, he attempted to use it to commit the offence of cheating by presenting it dishonestly. The Court relied on the Supreme Court decision in Parbatbhai Aahir v. State of Gujarat, (2017) 9 SCC 641 and held that the facts of the case rendered it beyond a dispute that is private in nature. It involved serious economic offence which concerns not only the entity against the account of which the forged cheque was attempted to be encashed but also the bank where the account was maintained. The Court was of the view that this was not a case meriting exercise of inherent powers to bring an end to the prosecution. The petition was, thus, dismissed. [Pawan Gupta v. State (NCT of Delhi), 2018 SCC OnLine Del 11121, dated 23-08-2018]